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Conditionality of Property Contracts, 2nd May 2012

Often, when parties are entering into a form of property contract (for example purchase missives or a lease) they need to have comfort that the contract is “nailed down”.

This is so that they can start to incur costs relating to the relocation, but on the other hand they also wish to have the option to back out of the deal in the event of certain particular circumstances.

When this is the case, the contract can be prepared so that the completion of the deal, date of entry and principal obligations only kick in once certain conditions are satisfied. These conditions are called suspensive conditions.

In these circumstances, the deal cannot go ahead until the party reliant upon these conditions (it can, in some cases, be both parties) has intimated their satisfaction. The contract will also provide that entry (or the commencement of certain other relevant obligations) will only be triggered at a certain time, in relation to the satisfaction of these conditions. So, for example, the contract might say that the lease or purchase date of entry will be ten working days after purification of the last of the various suspensive conditions.

This can be very helpful in a host of situations such as:

- A purchaser or a tenant obtaining a structural survey to ensure the property is in reasonable condition;
- A purchaser obtaining bank funding;
- A purchaser or tenant obtaining local authority consents in respect of their proposed use of the property or in relation to their proposed fitting out works.

So, in conclusion, if you are negotiating a deal with another party and face a “chicken and egg” dilemma due to the fact that you want the contract to be in place but at the same time you need to be satisfied on certain points before you can actually complete the deal, the introduction of suspensive conditions could be the solution.

Last updated: 4.06pm, Wednesday 2nd May 2012

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